Banks should not ignore large operational risk losses suffered by firms in their peer group just because such events are difficult to include in the probability distribution of a standard op risk capital model, according to new research.
In his recent paper, Modelling very large losses, Henryk Gzyl, professor in the centre of finance at the IESA Business School in Caracas, Venezuela, presents a simple probabilistic model for aggregating very large losses to a data series. His research claims to
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